Hong Kong-listed casino investor Summit Ascent Holdings Ltd has explained in a Monday filing why more than half the expected proceeds from a nearly HKD1.64-billion (US$208.8-million) rights issue will go towards a new Philippine casino investment, rather than Summit Ascent’s existing gaming interest in the Russian Far East.
Summit Ascent is the the lead promoter of the Tigre de Cristal casino complex in the Russian Far East. Suncity Group Holdings Ltd, controlled by Macau junket boss Alvin Chau Cheok Wa, has a leading stake in Summit Ascent. Mr Chau is the boss of privately-held Macau junket investor, Suncity Group.
Summit Ascent said the higher-economic-growth Philippine market offered better prospects, and described the Russian Federation as having a “poor economic climate”, and at national level, “bureaucratic uncertainty”.
The fund-raising exercise – due to start on Tuesday (September 22), with the results announced on October 14 – will involve an offer of three rights shares in Summit Ascent for every two shares held as of September 17 in that firm.
There will then be a subscription exercise in relation to the rights shares, with a net subscription price per rights share, of approximately HKD0.598, the firm noted in its rights offer prospectus filed on Friday with the Hong Kong Stock Exchange.
Suncity Group Holdings said in June that it had agreed to pay – via one of its units – about HKD1.24 billion for underwritten shares of Summit Ascent. Once the deal is completed, Suncity Group Holdings will control a 69.78-percent interest in Summit Ascent, and the latter company will become an indirect subsidiary of Suncity Group Holdings. The deal was approved earlier this month by the shareholders of Suncity Group Holdings.
Assuming no other new shares will be issued in Summit Ascent and no shares will be bought back within a relevant time frame, then “approximately 52.3 percent, or HKD847 million,” of the money raised will go to the subscription for convertible bonds in Suntrust Home Developers Inc. The latter is a Philippines-listed firm involved in the development of a casino project in the Philippine capital Manila. Suncity Group Holdings is the majority shareholder in Suntrust.
In addition, “approximately 37.1 percent or HKD601 million” of the fund-raising exercise will go toward the “phase-two development of Tigre de Cristal,” the firm’s casino resort in the Primorye Integrated Entertainment Zone near the Russian Pacific port of Vladivostok. The filing also noted that “approximately 10.6 percent or HKD170 million,” would be for “general working capital” of Summit Ascent.
“The board believes that investing part of the net proceeds from the rights issue for the subscription to achieve the diversification, is more compelling than expanding the current scale of the phase-two development of Tigre de Cristal,” said Summit Ascent.
The firm added: “Compared to the Russian Federation’s average annual gross domestic product growth of 1.4 percent from 2016 to 2019, the Philippines recorded an average annual GDP growth of 6.6 percent across the same period, with the gambling sector in the Philippines growing at an even faster rate…”
Summit Ascent has a 60 percent equity interest in Oriental Regent Ltd, the actual operator of Tigre de Cristal.
In late August, Summit Ascent reported a first-half loss of HKD47 million, compared to HKD42.8-million in profit in the first half of 2019.
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